European shares end down for sixth day

European shares ended lower for the sixth straight session yesterday as crude oil's retreat from record high prices dented heavyweight oil stocks but Royal Bank of Scotland rose after announcing an investment in China.

RBS closed up two per cent after saying it would invest $1.6 billion as part of a group buying a 10 per cent stake in Bank of China for $3.1 billion.

Some investors had worried Europe's second-largest bank might overpay or commit to a much larger investment and also welcomed RBS's plans to pay for the deal by selling its shares in Spain's Santander.

By 1533 GMT, the FTSEurofirst 300 index of pan-European blue chips was unofficially closed 0.2 per cent lower at 1,183.6 points on modest turnover of around 1.8 billion shares.

The narrower DJ Euro Stoxx 50 index fell 0.4 per cent to 3,286.7 points.

The Eurofirst 300 has fallen 1.4 per cent since hitting a 39-month peak of 1,199.9 points last week.

Recent data, particularly Wednesday's US producer prices which came in double market expectations, have raised fears of higher inflation and higher interest rates needed to contain it.

"A Federal Reserve interest rate above four per cent, if the rest of the environment is unchanged, would start to make it difficult for equities to do well," said John Haynes, a strategist at Carr Sheppards Crosthwaite.

"We are quite close to the level where cash could again become attractive. The only thing stopping it is that earnings are growing at 15 per cent or so."

JP Morgan is negative on equities overall, due mainly to a view that US earnings are likely to start to disappoint as margins come under pressure from higher input costs and the impact of a flattening yield curve on bank earnings.

However, euro zone earnings were likely to continue exceeding expectations, said Mislav Matejka, a European equity strategist at JP Morgan.

"In the second quarter, we are seeing that both top line and bottom line are doing very well... Unit labour costs are actually going to be trending down, which means that the consumer is going to be under pressure for longer, but relative to that, the corporate sector is going to be in a bit better position."

In New York, the blue-chip Dow Jones industrial average was 0.1 per cent weaker at 10,543.2 points, while the Nasdaq Composite Index fell 0.4 per cent to 2,135.8 points.

Around Europe, London's FTSE 100 closed 0.4 per cent lower, while Paris's CAC-40 ended down 0.2 per cent. In Zurich, the SMI fell 0.5 per cent and Frankfurt's DAX closed 0.4 per cent weaker.

Energy stocks were the biggest sector losers as US light crude traded down almost $4 a barrel from last week's record peak above $67 a barrel.

BP fell two per cent, while Total shed 1.2 per cent. UK retailers mostly outperformed their European peers after data showed a smaller-than-expected fall in retail sales in the wake of the July bombings in London. Tesco rose 0.2 per cent while rival Marks & Spencer added 0.7 per cent.

In Switzerland, insurer Zurich Financial ended 1.6 per cent lower after disappointing non-life operations overshadowed forecast-beating earnings, while Ciba Specialty Chemicals closed down 2.2 per cent after reporting a fall in second-quarter earnings and cutting its full-year forecast as high prices continued to hurt earnings.

Nordic bank Swedbank added 1.4 per cent after its earnings topped forecasts while UK drug company Shire Pharma jumped 6.5 per cent on talk of a key drug deal.